Checklist: Your Final Walk-Through

Closing time is hectic, but you should always make time for a final walk-through to make sure that your home is in the same condition you expected it would be. Here’s a detailed list of what to check for on your final walk-through.

  • Basement, attic, and every room, closet, and crawl space have been checked.
  • Requested repairs have been made.
  • Copies of paid bills and warranties are in hand.
  • No major, unexpected changes have been made to the property since last viewed.
  • All items included in the sale price—draperies, lighting fixtures, etc.—are still on site.
  • Screens and storm windows are in place or stored onsite.
  • All appliances are operating (dishwasher, washer/dryer, oven, etc.).
  • Intercom, doorbell, and alarm are operational.
  • Hot water heater is working.
  • Heating and air conditioning systems are working.
  • No plants or shrubs have been removed from the yard.
  • Garage door opener and other remotes are available.
  • Instruction books and warranties on appliances and fixtures are available.
  • All debris and personal items of the sellers have been removed.
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Vocabulary: Transaction Documents

When you walk away from the closing table with a big stack of papers, know what to file away for future reference.

Loan estimate
Your lender is required to provide you with this three-page document within three business days of receiving your loan application. It will show estimates for your interest rate, monthly payment, closing costs, taxes, and insurance. You’ll also learn how your interest rate and payments could change in the future, and whether you’ll incur penalties for paying off the loan early (called “prepayment penalty”) or increases to the mortgage loan balance even if payments are made on time (known as “negative amortization”).

Closing disclosure
Your lender is required to send this five-page form—which includes final loan terms, projected monthly payments, and closing costs—three business days before your closing. This window gives you time to compare the final terms to those in the Loan Estimate (see above), and to ask the lender any questions before the transaction is finalized.

Mortgage and note
These spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.

Deed
This document officially transfers ownership of the property. In a cash deal, it goes to you, but otherwise you won’t get the deed until you pay off the mortgage.

Affidavits
These are binding statements by either party. For example, the sellers will often sign an affidavit stating that they haven’t incurred any liens on the property.

Riders
This word describes any amendments to the sales contract that affect your rights. For example, the sellers may arrange to retain occupancy for a specified period after closing but agree to pay rent to the buyers during that period.

Insurance policies
These documents provide a record and proof of your coverage, be they insuring the title or the property itself. Homeowners insurance documents will generally be your responsibility, while proof of title insurance will be given to you at the closing table.

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What to Know About Title Insurance

Title insurance protects your ownership right to your home, both from fraudulent claims against your ownership and from mistakes made in earlier sales, such as misspellings of a person’s name or an inaccurate description of the property. In some states it is customary for the seller to purchase the policy on your behalf.

Your mortgage lender will require it.
Title insurance protects the lender (and the secondary markets to which they sell loans) from defects in the title to your home—which could include mistakes made in the local property office, forged documents, and claims from unknown parties. It ensures the validity and enforceability of the mortgage document. The amount of the policy is equal to the amount of your mortgage at its inception. The fee is typically a one-time payment rolled into closing costs.

There are two different policies to consider purchasing.
The first policy, the one your lender will require, protects the lenders investment. You may also purchase an owner’s policy that provides coverage up to the purchase price of the home you are buying.

You have the right to choose your provider.
You can shop around for a lower insurance premium rate at a wide variety of sites online. You should first request quotes from a few companies and then reach out and speak to them. Ask about hidden fees and charges that could make one quote seem more attractive than another. Also, find out if you’re eligible for any discounts. Discounts are sometimes available if the home has been bought within only a few years since the last purchase as not as much work is required to check the title. You can also ask your lender or real estate professional for advice or help with getting quotes. Make sure the title insurance company you choose has a favorable Financial Stability Rating with Demotech Inc.

Even new construction needs coverage.
Even if your home is brand-new, the land isn’t. There may be claims to the land or liens that were placed during construction that could negatively impact your title.

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How to Lower Homeowners Insurance Costs

The first step is to shop around; quotes on the same home can vary significantly from company to company.

Review the Comprehensive Loss Underwriting Exchange report.
CLUE reports detail the property’s claims history for the last five years, which insurers may use to deny coverage. Make the sale contingent on a home inspection to ensure that problems identified in the CLUE report have been resolved.

Seek insurance coverage as soon as your offer is approved.
You must obtain insurance in order to buy your home. And you don’t want to find out at closing time that the insurer has denied you coverage.

Maintain good credit.
Insurers often use credit-based insurance scores to determine premiums.

Buy your homeowner’s and auto policies from the same company.
Companies will often offer a bundling discount. But make sure the discount really yields the lowest price.

Raise your deductible.
If you can afford to pay more toward a loss that occurs, your premiums will be lower. Also, avoid making claims for losses of less than $1,000.

Ask about other discounts.
For example, retirees who tend to be home more than full-time workers may qualify for a discount on theft insurance. You also may be able to obtain discounts for having smoke detectors, a security system, and high-quality locks.

Seek group discounts.
If you belong to any associations or alumni organizations, check to see if they offer deals on coverage.

Conduct an annual review.
Take a look at your policy limits and the value of your home and possessions every year. Some items depreciate and may not need as much coverage.

Investigate a government-backed insurance plan.
In some high-risk areas, the federal or state government may back plans to lower rates. Ask your agent what’s available.

Insure your house for the correct amount.
Remember, you’re covering replacement cost, not market value.

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What to Know About Homeowners Insurance

A homeowners insurance policy will protect you against certain losses and damage to your new home and is generally required by lenders prior to closing. Some lenders will collect the money you owe for homeowners insurance as part of your monthly mortgage payment and place it in an escrow account, paying the insurer on your behalf when the bill is due.

Coverage exclusions:
Most insurance policies do not cover flood or earthquake damage as a standard item. You may need to buy these types of coverage separately.

Dollar limitations on claims:
Even if you are covered for a risk, there may be a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.

Replacement cost:
If your home is destroyed, you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll still receive only $150,000.

Actual cash value:
If you choose not to replace your home when it’s destroyed, you’ll receive replacement cost minus the depreciation. This is what’s referred to as actual cash value.

Your liability:
Generally, your homeowner’s insurance covers your liability for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that amount is sufficient, especially if you have significant assets.

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How To Buy in a Tight Market

Increase your chances of getting your dream house in a competitive housing market.

Get prequalified for a mortgage.
You’ll be able to make a firm commitment to buy and your offer will be more desirable to the seller.

Stay in close contact with your real estate agent.
Your agent will be on the lookout for the newest listings that meet your criteria. Be ready to see a house as soon as it goes on the market — if it’s a great home, it will go fast.

Scout out new listings yourself.
Browse sources such as realtor.com and local real estate listing sites. Set up alerts for the neighborhoods and characteristics you’re looking for. Drive through your target neighborhoods, and if you see a home you like for-sale, send the address and listing agent’s name to your agent, who can schedule a showing for you.

Be ready to make a decision.
Spend plenty of time in advance deciding what you can afford and must have in a home so you won’t hesitate when you have the chance to make an offer.

Bid competitively.
Your first inclination may be to start out offering something less than the absolute highest price you can afford, but if you go too low in a tight market, you will likely lose out.

Keep contingencies to a minimum.
Restrictions such as needing to sell your home before you move can make your offer unappealing. Remember that, if the market is tight, you’ll probably be able to sell your house rapidly. You can also talk to your lender about getting a bridge loan to cover both mortgages for a short period.

But don’t get caught in a buying frenzy.
Just because there’s competition for a home doesn’t mean you should buy it. And even though you want to make your offer attractive, don’t neglect inspections that help ensure the house is a sound investment.

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Your Short Sale Purchase Team

If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you’ll want by your side:

Experienced real estate attorney.
A real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. The attorney will also be indispensible if you want any provisions or specialized language written into the purchase contract.

Qualified real estate professional.
You may have close friends or relatives in real estate, but they aren’t truly knowledgeable about short sales, they may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will help you find short-sale listings, negotiate the purchase, and have smooth communications with the lender. You might also seek out pros who have the Short Sales and Foreclosure Resource (SFR®) certification, which generally identifies REALTORS® who have learned the skills needed to help buyers and sellers of distressed properties.

Title officer.
It’s a good idea to have a title officer do an initial title search on a short-sale property to examine all the liens attached to the property. If there are multiple lien holders (second or third mortgage/lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get the contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

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Before Making a Short Sale Offer

If a home is being sold for less than what the current owner owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Home owners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Answering these questions will help you determine if a short sale is a good fit for you.

Are you very patient?
Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) still has to approve the sale. When there is only one mortgage, lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer. If you make an offer tremendously lower than the fair market value of the home, the lender could make a counteroffer, which will lengthen the process.

Is your financing in order?
Lenders like cash offers. But even if you can’t pay cash, it’s important to show you’re well qualified. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

Do you have any contingencies?
Lenders like flexible terms. If you must sell a home before you can close, or you need to be in your new home by a certain time, a short sale may not be for you. Also, you will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

Can you take rejection?
Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially strapped sellers. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

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Checklist: Your Mortgage Application

Every lender requires documents as part of the process of approving a mortgage loan. Here are documents you’re generally required to provide..

  • W-2 Tax returns — or business tax returns if you’re self-employed — for the last two or three years for every person signing the loan.
  • At least one pay stub for each person signing the loan.
  • Account numbers of all your credit cards and the amounts for any outstanding balances.
  • Two to four months of bank or credit union statements for both checking and savings accounts.
  • Lender, loan number, and amount owed on installment loans, such as student loans and car loans.
  • Addresses where you’ve lived for the last five to seven years, with names of landlords if appropriate.
  • Brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
  • Your most recent 401(k) or other retirement account statement.
  • Documentation to verify additional income, such as child support or a pension.
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